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V0724-14 17 March 2014 · SG de Tributación de las Operaciones Financieras Criterion in force
IRPF · indemnización

Life insurance compensation for permanent disability is not exempt from Income Tax

A worker inquired whether compensation received from a collective life insurance policy following total permanent disability caused by a work accident is exempt from Personal Income Tax (IRPF). The Directorate-General for Taxes (DGT) ruled that it is not, as it does not constitute accident insurance.

The question raised

Whether said compensation is exempt from Personal Income Tax (IRPF).

The DGT's ruling

The exemption under Article 7.d) of Law 35/2006 applies to compensation for personal injury arising from accident insurance contracts. Since the policy under analysis is a life insurance policy covering various contingencies (death, absolute disability, total disability, etc.), it cannot be classified as accident insurance. Therefore, the compensation received is not covered by said exemption.

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